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Home Price Growth Expectations Decline Sharply As Inflation Poses A Threat

Sarah Wolak
Jul 11, 2022
New York Federal Reserve

Federal Reserve Bank of NY’s Center for Microeconomic Data survey reveals short-term inflation expectations increased among those surveyed.

KEY TAKEAWAYS
  • Credit access perceptions and expectations continued to deteriorate parallel with home price growth expectations.
  • The median expected change in home prices one year from now dropped dramatically to 4.4% from 5.8%, which was the lowest reading of the series since February 2021.

The Federal Reserve Bank of New York’s Center for Microeconomic Data released the June 2022 Survey of Consumer Expectations (SCE) today. It shows an increase in short-term inflation expectations, but a decline in medium-term and longer-term inflation expectations.

The report, which contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave, showed that home price growth expectations declined sharply, along with year-ahead spending growth expectations. Credit access perceptions and expectations continued to deteriorate.

Median one-year-ahead inflation expectations increased to 6.8%, from 6.6% in May, marking a new series high. In contrast, median three-year ahead inflation expectations decreased to 3.6% from 3.9%.

Median five-year ahead inflation expectations, which have been elicited in the monthly SCE core survey on an ad-hoc basis since the beginning of this year, declined to 2.8% from 2.9%, after being stable at 3.0% during the first three months of the year.

The median expected change in home prices one year from now dropped dramatically to 4.4% from 5.8%, which was the lowest reading of the series since February 2021. 

As for unemployment, mean unemployment expectations increased by 1.8 percentage points to 40.4%, which was the highest level since April 2020. The increase was driven by respondents with annual household incomes over $50k.

Although unemployment expectations increased, the median expected growth in household income increased by 0.2 percentage point in June to 3.2%. 

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